India's largest lender State Bank of India raised the interest rates for deposits under a crore for tenures above two years, signaling an increase in lending rates in the future.
The retail term deposit rate has been increased by 10-25 basis points, according to a notification on its website. They are now:
- 7.10 percent for deposits between two-three years
- 7.20 percent for deposits between three-five years
- 7.27 for deposits between five-10 years
The hike in retail term deposits highlights a tightening liquidity in the Indian money market, brought about an interest rate hike by the U.S. Federal Reserve. A higher deposit rate in Indian banks will help the banks attract money from customers.
Banks have started looking at raising more funds by making deposits lucrative. SBI last increased its term deposit rates by 10-75 basis points on Feb. 28, subsequently increasing its lending rate by 10 to 25 basis points on March 1.